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How To Start A Business In Connecticut

How To Start A Business In Connecticut

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How To Start A Business In Connecticut

How To Start A Business In Connecticut

Thinking about launching your own business in Connecticut but feeling a bit lost on where to begin? Don’t worry; we’ve put together a simple guide that walks you through each step of the process. This includes how to officially set up your business, getting the right licenses, figuring out the money, and more. Step by step, we’ll help you understand what needs to be done so you can start your business with confidence.

Steps To Start A Business In Connecticut

Step 1: Choose a Business Idea

The first step in starting a business in Connecticut is having a good business idea. Maybe you already have an idea picked out, or maybe you are still deciding on one. Regardless, you can check out our library of business ideas to get detailed industry information on hundreds of types of businesses, along with costs to start, tips, and lots more.

Step 2: Write a Business Plan

With a clear business idea in mind, the next move is to put together a business plan. Think of this document as your game plan. While a business plan is important for obtaining funding, a business plan also helps you see your idea more clearly and the steps needed to make it real. This plan is also there to help calculate how much money you’ll need to start and run the numbers to see if your business idea can really work out.

If you haven’t written a business plan before, check out our guide so you can get started.

Step 3: Find the Money

Having a great idea is a big part of starting a business in Connecticut, but getting the money to get the business off the ground can be challenging. The most common sources include:

  • Conventional bank loans: Loans from private banks and credit unions are a common funding source for businesses. Requirements vary but generally entail a personal investment, good credit, collateral, and a business plan.
  • Loan guarantees: In some cases, the bank may need an additional guarantee before making the loan. The most popular is from the Small Business Administration and their 7(a) and 504 loan guarantee programs.
  • Investors: Money may be available to fund your business through angel investors, venture capital firms, or personal connections. There are a few groups in Connecticut, such as the Landmark Angels, Tidal River, and Connecticut Innovations, that invest in small businesses.
  • Microloan programs: Microloans are small short-term loans that tend to be more flexible than banks. A couple of microloan options include the Community Economic Development Fund and CT Small Business Boost Fund.

Related: Understanding the different types of business funding.

Step 4: Select a Business Structure

Forming a business structure (also called a business entity) is the next step when starting a business in Connecticut. This choice forms the basis for the legal and tax framework under which your company will operate, and each structure has its own set of advantages and drawbacks.

The most common business structures are sole proprietorship, general partnership, Limited Liability Company (LLC), and corporation.

sole proprietorship is an individual that decides to go into business for themselves. This is the easiest and least expensive of the four entities to set up, as there is no state filing. The ease of startup is a big selling point; however, a major downside to the sole proprietorship is that the owner is personally responsible for the company’s debts and actions. If the business is sued, the owner’s personal assets are potentially at risk.

As a sole proprietorship (and partnership, too) operating under a Trade Name (sometimes referred to as a fictitious business name or DBA), a Trade Name will need to be registered with the Town Clerk’s Office where your business is located.

Related: How to form a sole proprietorship in Connecticut

General partnerships consist of two or more people conducting a business together. Like the sole proprietorship, there is no formal state filing. Also, like the sole proprietorship, the partnership has unlimited liability. If the partnership were to be sued, the partner’s personal assets would be equally at risk.

Related: What is a partnership?

corporation is a business structure that is a separate legal entity from the individual. While corporations are more expensive and difficult to form than sole proprietorships and partnerships, the major advantage is that the corporation provides personal asset protection for the owners should the corporation be sued. The downside is the compliance requirements and administrative burdens of having a board of directors, annual meetings for directors and shareholders, taking minutes at the meetings, issuing stock certificates, and more.

Related: How to form a Connecticut corporation

The Limited Liability Company (LLC) is a popular business entity choice because it provides the liability protection of a corporation with the sole proprietorship’s ease of operation. The Limited Liability Company does not have all of the burdens of the corporation and has the greatest tax flexibility of the four entities.

Related: How to form a Connecticut LLC

Forming a corporation or LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.


Some popular formation services include:


IncFile - Great service and free registered agent the first year.

Northwest - Privacy-Focused: Free registered agent and private business address for 1 year!

ZenBusiness - Easy to use and free registered agent for 1 year!

Step 5: Register the Business

After getting the business structure in place, the next step is to get the business registered. Depending on the nature of your business, you may need to acquire multiple licenses or permits from federal, state, or local authorities. A few common registrations include:

  • General business license: There is no general state of Connecticut business license; however, many cities require a business license to operate.
  • Employer Identification Number: An Employer Identification Number (EIN) is a unique nine-digit number issued by the Internal Revenue Service (IRS) to identify a business entity. In Connecticut, an EIN is required for certain business structures, to hire employees, or, in some cases, to open a bank account.
  • Connecticut Tax Registration Number: Businesses can register for their Sales Tax Permit, withholding taxes, and other state taxes with the Connecticut Department of Revenue Services.
  • Trade licenses: Some services, such as acupuncturists, family planners, landscape architects, and pharmacists, require licensing in Connecticut.  
  • Zoning permit: Many cities and/or counties require zoning approval before operating a business out of a location, which sometimes includes home-based businesses.

Related: What business licenses and permits are needed in Connecticut?

Step 6: Open a Business Bank Account

Once the business is registered and licensed, you will have the documentation needed to open a business bank account. It’s important to keep your business finances separate from your personal finances for accounting, tax, and in some cases, liability purposes. Every bank is different, but in general, they will request:

  • Sole proprietorship & partnership: Trade Name Certificate, EIN or SSN, and owner(s) state ID
  • Corporation: Articles of Incorporation, bylaws, Certificate of Good Standing, EIN, and owner(s) state ID
  • LLC – Articles of Organization, Operating Agreement, Certificate of Good Standing, EIN, and owner(s) state ID

Step 7: Hire Employees

As a small business owner in Connecticut, hiring your first employee is a significant milestone, and if your plans include hiring employees, you will need to register as a new employer. This includes registering for the EIN in addition to registering for a Withholding Tax Number and Business Tax Registration from the Connecticut Department of Revenue Services and an Unemployment Account Number from the Connecticut Department of Labor.

Employers will also need to stay on top of things like federal and state employment laws, payroll, and tax management.

Related: Steps to hiring your first employee in Connecticut

Step 8: Obtain Business Insurance

Another step to look into is business insurance. While not needed for every business, some research is needed in order to safeguard your investment, employees, and business operations.

Every business has unique risks based on its industry, location, and specific operations. Begin by conducting a thorough risk assessment to identify potential exposures, such as property damage, liability claims, or employee injuries.

Also, as a small business owner in Connecticut, you may be required to carry certain types of insurance, depending on your business structure and operations. For example, workers’ compensation insurance is mandatory for most businesses with employees.

Related: Types of insurance your business may need

Step 9: Set up a Bookkeeping System

With the business close to opening, plans need to be made regarding how income and expenses will be tracked.

A good bookkeeping system not only helps a small business owner report taxes correctly, but it also gives better insights for the finances of the business.

Related: Setting up accounting for a business

This material is property of StartingYourBusiness.com

Common questions when starting a business in Connecticut

What are the steps to starting an LLC in Connecticut?

There are three main steps to starting an LLC in Connecticut. These include:

1. Making sure the LLC name is available
2. Appointing a Connecticut Registered Agent
3. Filing the Certificate of Organization

To learn more about how to start an LLC, check out our guide on starting an LLC in Connecticut.

How much does it cost to start an LLC in Connecticut?

The cost to file the Certificate of Organization with the Connecticut Secretary of State, which is the paperwork to create an LLC in Connecticut, is $120.

Does a sole proprietor need a business license in Connecticut?

In Connecticut, whether a sole proprietor needs a business license depends on the type of business they are running and where it’s located. Connecticut doesn’t have a state business license, but certain businesses are required to obtain specific licenses or permits to operate legally. This can vary based on the industry, such as healthcare, construction, food services, and others, as well as local city or county regulations.

For example, if you’re opening a restaurant, you’ll need health permits, a food service license, and possibly a liquor license. If you’re in a profession like real estate or cosmetology, you’ll need the appropriate state-issued license. Additionally, local permits for zoning, signage, and home-based businesses might be required depending on your town’s rules as well.

Connecticut Small Business Resources

There are 354,013 small businesses in Connecticut, which is 99.3% of all businesses in the state,1 and over 730,000 people are employed by these small businesses.2 Because of the economic impact of small businesses, there are a number of small business resources to help Connecticut businesses start and grow. Some of these include:

Sources

  1. Small Business Administration ↩︎
  2. Census Bureau ↩︎

How To Start A Business In Connecticut

How To Start A Business In Connecticut

Greg Bouhl

Greg Bouhl

Welcome! My name is Greg Bouhl, and I am a serial entrepreneur, educator, business advisor, and investor.

StartingYourBusiness.com is here because of the many clients I worked with who made decisions based on inaccurate and outdated information.

Starting a business is hard, but here you will find the practical tools, resources, and insider tips to help you successfully start a business.

If there is a question about starting a business or help finding a resource, I'm here to help!

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